Louis Vuitton Marketing \"Louis Vuitton in Japan\"

Louis Vuitton Marketing

"Louis Vuitton in Japan" explores the history, heritage and phenomena that the LV brand is today and how it expanded globally to widen its reach to all consumers of luxury. Through strategic extension of its network throughout the world, Louis Vuitton built itself from one city in France to a vast system of inter-related, complex actors that serve the avid, fashion lover. Special emphasis is on the Japanese sector as it contributes an immense magnitude in terms of turnover and profit to annual ones. (Paul, Ferroul, 2010)

Incorporated in the year of 1854 under the name of "Louis Vuitton: Malletier a Paris," Louis Vuitton, the founder, pioneered flat bottom trunks which were an innovation for its early time. The luggage items advocated lightness and superior storage volume. Thirty years later, it increased its geographical scope to London, England at a premium location (Oxford Street). By 1888, it had created the Canvas Damier Pattern to solidify its brand identity. The intention was to have an exclusive print that would resonate with every audience as a designated, rich and elite design that would echo the brand of Louis Vuitton in the individual's mind. In contemporary language, it is the modern concept of brand awareness and brand recall that LV understood more than a hundred and fifty years ago. It was further captured through the branded logo of "marquee Louis Vuitton deposee." (Louis Vuitton in Japan, 2010)

Georges Vuitton stepped into fill the void created after the demise of his father, the original founding father. He was a visionary who aspired to launch Louis Vuitton around the globe and create the base for a corporation that would transcend international, topographical and cultural barriers. To commence the transformation of his dream into a tangible form of reality, he participated in the Chicago World Fair in the year of 1893 and marketed the brands there. From there on, he toured the breadth and length of the United States of America in order to get his product out there. Three years later, he created the Canvas Monogram that is today recognized as the signature LV look. He obtained trade licenses globally to protect his copyrights and to restrict counterfeiting. When the world was on the verge of breaking out into the first global war in 1914, LV launched its Louis Vuitton Building of the Champ-Elysees -- a representation of the stature, esteem and prosperity that has been achieved. It was in this time duration that LV truly embarked upon its journey to produce a universal footprint. Shops and stores were opened in faraway places such as Bombay, New York, Washington, Alexandria and Buenos Aires. Georges Vuitton broadened his family legacy and the reins were taken over by the third generation in 1936. (The Foundation in Louis Vuitton in Japan, 2010)

Gaston-Louis Vuitton comprehended the vitality of diversity and ventured to apply the famous, landmark designs his company owned to small leather goods. By employing brand extensions, the LV firm undertook the design and production of purses wallets. It began advertising campaigns through famous, renowned Hollywood actresses and was one of the first companies to strategize through product placements in motion pictures. Audrey Hepburn carried a Louis Vuitton handbag in the 1963 movie of "Charade," directed by Stanley Donan. By the 1970s, Louis Vuitton owned the greatest market share in the worldwide, luxury goods sector. The company focused its efforts in reviving and generating clientele in Japan. In 1977, this unique country was contributing $10 million in annual profits through two stores. Over the next five years, it further expanded to Taipei, Taiwan and South Korea. Its concentration was on the rise in the Asian market.

LV merged with Moet et Chandon and Hennessy in 1987 to tap into the champagne and brandy industry. This made LVMH the largest luxury conglomerate in the entire world. Revenue improved by forty nine percent in 1988 alone and now LV existed in more than one hundred and thirty nations. It did not stop here and was further motivated to keep on going by capturing emerging markets.

Yves Carcells took over as President in the year of 1990 and he launched the first Louis Vuitton store in the capital of China. Located at the premium Palace Hotel, LV truly made its mark. The anniversary of the Monogram Canvas was celebrated worldwide with extravagant parties across seven major cities. They were held in LV stores where seven designers were requested to use their imagination to apply the famous design to other products.

Marc Jacobs, a famous American designer, took on as LV's Art Director in 1998 and he maneuvered Louis Vuitton into unchartered product categories, i.e. ready to wear and the first ever shoe collection. The synergies between Marc Jacobs and LV were unique in nature as the former had carved his way in the international fashion arena already. He helped in launching the first jewelry collection in 2001 and then the Tambour watch collection the following year. Collaborations with contemporary designer Stephen Sprouse launched a limited edition of Monogram bags that were a huge success. The marketing strategy of LV was to adhere to its line of exclusivity and limited editions.

It carried on its globalization strategy by re-launching its original Champ Elysees store as the largest one in the world. It opened stores in the fashion capital of New York, Sao Paulo in Brazil, Johanessburg in South Africa and Shanghai, China. With more than fifty luxury brands to its name, LVMH restructured itself and divided off into five chief business segments: fashion and leather goods, wines and spirits, selective retailing, watches and jewellery, perfumes and cosmetics. With double-digit growth across most of its premium brands, LV celebrated its one hundredth and fiftieth birthday in the year of 2004.

Problem

The main dilemma that now faced Louis Vuitton after years of growth and prosperity was that it had to diversify its revenue base as in 2004; more than fifty five percent of the revenue came in from Japan. Times were changing with the advent of information technology and ongoing revolutions in communication. Consumer behavior was evolving due to global circumstances (such as recession) and it was time for LV to rethink its strategy.

Another major problem it had to deal was that of counterfeiting. The brand essence of Louis Vuitton was built on privilege, esteem and exclusivity. This was being jeopardized due to the wide availability of fake LV designed bags that gave the delusional appearance of authenticity.

A third chief tricky and problematic component was psychological. It was the fear that Marc Jacobs may leave, as it was he who had guided the entire company into the realm of high fashion. Along with that, retaining international control of its operations, strategies and image was becoming more challenging as Louis Vuitton entered new markets.

Issues

There were sundry issues in the land of Japan that Louis Vuitton had to countenance. They ranged from industrial predicaments to internal ones. In reference to the market itself, the competitive landscape in Japan was vast and colossal. Luxury giants such as Bulgari, Burberry, LV, Tiffany & Co, Salavatore Ferragamo, Coach, Hermes, Baccarat and such had approximately more than twenty five to thirty five of its total revenue being cashed in from this small region. (Exhibit 7) Japan's topographical size is apparently tantamount to the American State of Montana. Within that, it contains 34 Bulgari stores, 115 Coach Stores, 37 Chanel stores, 49 Gucci stores, 50 Tiffany & Co boutiques, 64 Salvatore Ferragamo chains, along with more than two hundred and fifty two shops of LVMH. As the highest luxury capita per spend is in the country of Japan, it is no wonder that all the luxury market leaders are striving to get a slice of the pie.

The dynamics of the Japan marketplace were morphing to include newer, foreign products that had varying strategies of high quality and affordability. This was a new concept that was introduced to the average Japanese consumer through the launch of the "popular Swedish brand" of H&M in the year of 2008

Prior to the launch of the new "fast fashion" and economical entities, Japan had been considered to be a "group oriented" culture. Intense and severe pressure existed upon the surface of the social strata to possess premium brands that augmented one's stature in society. Youthful females in Japan were way more conscious and self-aware of their appearance and beauty items. The pressure was greater here than in Western regions. Consumers addicted to high end, luxury goods were not foreseen positively in the Western communities, however, in Japan, it was more of a mass need than a widely accepted norm. There was a large middle class that catered to this. It was a psychological challenge for the average Japanese customer to own something "that was beautiful."

Consumer behavior was now changing its mindset, attitude and preferences to reflect recognition for the value of money and an appreciation for more affordable goods. Diminutive items such as leather wallets, purses and clutches were increasing in sales and popularity due to the affordability factors. Such companies had turned the luxury customer segment into more of a mass market.

International economic variables were influencing the levels of consumption. The Japanese Yen had appreciated and foreign, luxury brands were decreasing their prices. The entire global system of LV was liable to changes in the exchange rate, quality costs and global production costs. This also implied a fall in demand for luxury goods due to the reductions in purchasing power in the year of 2008 and 2009. However, a relatively decent growth rate of six percent over the next few years was still expected.

Louis Vuitton's marketing strategies had been based on limited editions and collections. It wanted to incorporate its designs and adapt them to the preferences and tastes of the local market. LV recruited the famous Japanese artist Takishi Murakami to recreate its monogram design across a white and black background with thirty three different and unique colors. These were imprinted on authentic LV bags and the smiling blossom designs were a huge hit. Such collaborations continued over the next few years, but overall, there was a conflict of interest as industrial trends were evolving to include high end yet thrifty stores that catered to the masses.

In the year 2007, Dana Thomas published a book "Deluxe: How Luxury Lost its Luster" where she claimed that more than forty percent of Japan owned an LV item. The analogy of comparison was that to the famous yellow logo of McDonalds. These had an adverse impact on the brand image of Louis Vuitton. Also, as LV had become accustomed to constantly generating "limited edition collections" on a yearly basis, people began to perceive bags from preceding seasons as being out of fashion. This went against the core of the LV brand which promoted "longevity" and "tradition." The LV brand was suffering from brand dilution as customers' were becoming confused about its positioning, especially as it was involved in so many different product lines.

Another large obstacle that LV had to handle was that of counterfeit Louis Vuitton bags that gave the delusional aura of being a genuine, bona fide LV product. Its logo was also being misused. Seoul, Hong Kong, and Los Angeles were contributing to the manufacturing of fake LV bags inadvertently. There was an outpour from those locations into Japan, especially South Korea, the biggest exporter of counterfeit LV bags. It was becoming increasingly difficult to differentiate between a real LV bag and a phony one. Despite Japan altering its Intellectual Property Rights laws to resemble those in the Western hemisphere of the globe, it still did not put a complete stop to counterfeit bags. There was a huge fall out in the year of 2008 with an accusation against the Japanese "Super Girls Website" auction site that claimed that more than ninety percent of the LV bags provided through it were not authentic.

It is said that an organization is only as strong as its leadership. The first Japanese Chief Executive Officer, Kiyotaka Fujii, took over the Japanese subsidiary of LV in December 2006. The intention to place a person of caliber of Japanese origin was deliberate and meant to stay in sync with the strategy of customizing to the local needs. It was believed that a Japanese leader would provide insights to the company that had not been explored before. Fujji was an interesting and fascinating choice as he had pharmaceutical and technological experience prior to joining LV. The company now looked to him to guide them to further growth in the Japanese market.

Alternatives

Even in June 2008, Louis Vuitton launched another "limited" series of designer products. This strategy was not working well anymore due to the new, emerging players in the high fashion realm. The time had come for Louis Vuitton to redirect its purpose and strategy to oversee what it could truly accomplish in the Japanese country.

One action plan could include the introduction of a more affordable, yet premium line of wallets, purses and clutches with the famous LV brand. The following action plan explores how this could be done. The products would be restricted to the above mentioned: wallets, purses and clutches. They could be manufactured from a less expensive resource material of leather, instead of Northern European cattle, perhaps using cattle within Japan may help. Infact, the optimal methodology would be to establish a plant within Japan itself. This would cut down on manufacturing expenses and employ Japanese labor. It would promote the fact that it is helping in sustaining the sluggish economy by creating jobs and stimulating demand. Cutting down on costs would permit LV to competitively price its brand. It could penetrate the market by illustrating to the Japanese consumer that it has understood the different mindset that now prevails: of lower cost, more economical brands that still offer great, standardized quality that are still capable of offering the owner prestige and respect. LV should cut back on its "limited" editions and promote the availability and accessibility of its luxury items. It could position itself to be a brand that retains its rank in opulence, yet believes that luxury is for everyone. This could possibly be a winning strategy. Changing the distribution methodologies to include retailers and wholesalers may include less pricey as well. Expanding its web presence and reinforcing it will only reassert the brand as now marketing is no longer just 2.0; its being labeled as 3.0 by gurus such as Philip Kotler. He believes in the concept of customer lifetime value, loyalty and going beyond the extra mile. If LV follows his school of thought, they would launch more stores in Japan and in smaller cities. Promotional techniques could include an aggressive Internet marketing campaign that incorporates social media networking, blogging and testing. Direct marketing and BTL activities could promote greater exposure of the LV brand to the masses.